Iraq awash in phony U.S. money, and officials suspect Iran

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Iraq awash in phony U.S. money, and officials suspect Iran

By HANNAH ALLAM / McClatchy Newspapers

Published: April 15th, 2010 01:24 PM

NASIRIYAH, Iraq - At least $4 million in counterfeit U.S. currency has flooded into Iraq since December, and U.S. and Iraqi officials are trying to determine how much of the counterfeiting is purely criminal and how much might be an Iranian attempt to influence Iraqi politics.

While some of the bills were crudely made and easily detected, U.S. military officials said, much of the money seized so far has been sophisticated fake hundred-dollar notes that require special printing presses, ink and paper. In the Middle East, such capabilities typically belong to Iran and its proxies, notably branches of the Lebanese Shiite Muslim militant group Hezbollah, the officers said, citing recent briefings from the U.S. Secret Service.

"It runs the gamut of the local stuff on the HP printer - not the right paper, but kind of looks like it - all the way up to the very well made versions that we see, the ones coming in from Lebanon," said Army Col. Peter Newell, the commander of the 4th Brigade of the 1st Armored Division, which operates in Maysan and two other southern provinces near the border with Iran.

In recent weeks, the officers said, Iraqi and U.S. forces have launched an anti-counterfeiting push that involves educating merchants and bankers, as well as gathering intelligence on whether the money is linked to Iran's attempt to influence Iraq's March 7 parliamentary elections and to launder money for militia activity in Iraq's southern Shiite heartland.

Before the push, vendors bought and sold the fake money openly on Iraqi streets at 5 cents on the dollar for the homemade kind and 20 cents on the dollar for the harder-to-detect notes. The bills were so pervasive that they even turned up on American military bases via Iraqi subcontractors.

Southern Iraq, with provinces that border Iran, is the main entry point for Iranian goods: legitimate items such as produce and building supplies and contraband such as weapons, drugs and counterfeit cash. Iraqi and U.S. agents have seized about $500,000 of the fake hundred-dollar bills, nearly all of it in Maysan and other provinces near the border.

In the port city of Umm Qasr last month, bank workers discovered more than $100,000 in fake U.S. currency among its deposits and turned it over to authorities, U.S. and Iraqi officials said. A couple of months before that, police in Karbala busted an all-female counterfeit gang that was passing fake notes at jewelry, gift and clothing stores in a money-laundering attempt, according to an account of the sting by the Aswat al-Iraq news service.

"They were arrested in a store in downtown Karbala with a large amount of counterfeit 100 U.S. dollar banknotes in their possession," the report said.

A U.S. intelligence report said that even more money - at least $4 million - came into Maysan in December. U.S. military officers who've read the report declined to say how that figure was determined.

The sudden influx of counterfeit notes three months before the March 7 parliamentary elections suggests that Iran was trying to influence the outcome, the officers said.

An election "is certainly one of the purposes of a mass quantity of cash all of a sudden," Newell said. "It can pay for lethal aid; it can pay for elections; it can pay for commodities. It can be laundered into a lot of things, and what better time to launder significant amounts of money than during an election period, when lots of money is being moved?"

"Everything has been tied back to the Shiite extremist groups and the (Iranian Revolutionary Guard Corps) in Iran. There's been no other source," said a U.S. military intelligence officer based in southern Iraq, who spoke on condition of anonymity so as not to compromise his work on sensitive cases.

Counterfeiting isn't new in Iraq. In the early 1990s, American agents, reportedly in cooperation with regional allies, flooded Iraq with fake currency in an attempt to put pressure on the then-dictator Saddam Hussein, who was dealing with massive inflation and the rapid devaluing of Iraqi currency after the disastrous invasion of Kuwait.

Time magazine reported in 1992 that the CIA was dumping large amounts of counterfeit money into southern Iraq as part of a plot called "Operation Laundry." Saddam's administration imposed life sentences on anyone caught circulating the bills and death penalties for those who smuggled the counterfeit cash into Iraq, according to the news reports.

Nearly two decades later, Saddam is gone and U.S. forces are leading an anti-counterfeit campaign against Iran, passing out thousands of detection pens to southern Iraqi merchants and weaning Iraqi companies off large cash transactions in favor of newly introduced wire-transfer options at local banks.

At the request of Iraqi judges, a Rome-based U.S. Secret Service team with expertise in fighting counterfeiters flew to southern Iraq in February and spent a week training American and Iraqi forces on spotting fake bills.

The Secret Service, through a spokesman in Washington, declined to comment on the origins of the counterfeit money in Iraq, citing an ongoing investigation. The agency did say that it discouraged the use of detection pens because they can produce false positives or false negatives. The pens, which resemble highlighter markers, leave a black streak if starch is detected in the paper. Genuine banknote paper doesn't contain starch.

Iraqi authorities also were taught to examine banknotes for watermarks, color-shifting ink, security threads and serial numbers to tell real ones from fakes.